Online Grocery is Flat – But Not for Long Folks

Online grocery is displaying very low YoY growth for the second quarter. If you factor in inflation, it’s slightly negative in $ terms. But we’ll call it a flat sector in 2022. 

But I don’t believe this will stay so for the long-term trend.

Why? 

1. Timesaving is sticky and attractive via word-of-mouth. Although delivery saves the most time, it costs 3-4x as much in fees and tips (if you’re not a jerk). Pickup is dominant and still saves all the in-store navigation time, which is impressive (after several months of adapting to it) to all but the most elite time managers (i.e. professional managers). 
   
2. Pickup is also free for $35+ orders at most chains or only $5 for small baskets. The fees for pickup are nominal. Tipping is not required or even prompted for most chains. Inflation may deter small basket pickup, but this is temporary by nature. 
   
3. The upper middle class will continue to accelerate home delivery despite higher fees as they increasingly view shopping as going to a crowded bar. The fees are higher but not in a way that deters this population segment, even when they tip high. $25-50 tips for family home deliveries aren’t uncommon. 
   
   

We’re most likely seeing a combination of a middle-class pullback on home delivery dragging down the topline temporarily. Hard to say since no one decomposes the data even by income tiers. The fact that online shopping is steadily gaining households in 2022 and the monthly-active user base is increasing is proof of the baseline long-trend continuing.